Gold & Silver Daily

Ed's Critical Reads

Oct 25, 2014

Sears to close more than 100 stores and lay off nearly 5,500 employees

Sears Holdings Corp is shuttering more than 100 stores and laying off at least 5,457 employees, investor website Seeking Alpha reported on Thursday, indicating the struggling retailer may be stepping up store closures.

Sears said in August it had closed 96 stores in the six months since February and planned to close a total of 130 under-performing stores during the full fiscal year. It added at the time that it may shutter additional stores beyond the 130 target.

Sears spokesperson Chris Brathwaite declined to comment on the number of planned closures, saying the company would provide an update when it reports quarterly earnings next month. Reducing operations to the best performing stores is key to Sears’ revival strategy, he said.

“While this has resulted in store closures where appropriate – decisions that we do not take lightly – we continue to have a substantial nationwide footprint with a presence in many of the top malls in the country,” Brathwaite said.

This news item appeared on theguardian.com Internet site at 3:33 p.m. EDT on Thursday afternoon---and I thank reader 'h c' for today's first story.

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The U.S. Housing Recovery Has Been Canceled Due To Data Revisions

Last month, when, with great amusement, we reported that "New Home Sales Explode Higher Thanks To... Record High Average New Home Prices?", we mocked the latest batch of bulls hit data released by the U.S. department of truth as follows:

New Home Sales rose a magnificent (seasonally-adjusted annualized rate) 18% in August - the biggest monthly rise since January 1992 albeit with a 16.3 90% confidence interval, meaning the final number may well be +1.7%. At 504k, new home sales are back at May 2008 levels (though obviously massively below the 1.4 million homes sold at the peak in 2005). As a reminder, May's 504K new home sales print was later revised later to 458K. But even more stunning, new home sales in The West rose a mind-numbing 50% in August (and up 84.4% YoY - nearly double). 

Well, it is now a month later, and here come the revisions: first, that 50% surge in the West was revised... 30K lower.

In short: the euphoric, consensus-beating data for every single month since May has been revised lower, by on average 6% and as much as 9%. Perhaps finally people will realize that there is only one number that matters in the Census bureau's monthly new home sales report: the ±15.7 90% confidence interval. Well, people maybe, but not algos, who only care about one thing: whether the data beat or missed.

Now we wonder: will all those market surges over the past 4 months which were based on erroneous headline data, all be revised lower? Sarcasm off.

This short Zero Hedge piece appeared on their website at 10:29 a.m. EDT on Friday---and it's worth your time.  I thank Manitoba reader U.M. for sharing it with us.

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A Furious Albert Edwards Lashes Out at Central Bankers: "Will These Morons Ever Learn?"

Albert Edwards is angry, and understandably so: almost exactly two weeks after warning readers to "sell everything and run for your lives" and the market was on the verge of its first correction in years, several powerful verbal interventions by central banks from the Fed, to the BOJ to the ECB have staged yet another massive rebound which has nearly wiped out all the October losses.

Central-planning aside (and ask how much the USSR would have wished for central planning to indeed have been "aside") we share his frustrations, almost to the point where we would reiterate word for word Edwards' furious outburst, as follows: "Simply put, the central banks for all their huffing and puffing cannot eliminate the business cycle. And they should have realised after the 2008 Great Recession that the longer they suppress volatility, both economic and market, the greater the subsequent crash. Will these morons ever learn?"

Obviously, they will never will because their very entire existence is based on the assumption that what they do can impact the business cycle when all it does is merely delay the inevitable. In this case, a recession whose arrival will be so violent, it will crush not only US stocks, but the overall economy, which has for the past 6 years existed purely on the Fed's CTRL-P fumes. Fumes, which by the looks of things, will evaporate at just the worst possible moment: just when half of the world's entire growth in 2015 is expected to come from the U.S. (the other half from China).

This commentary appeared on the Zero Hedge Internet site at 7:21 p.m. EDT on Thursday evening---and I found it yesterday's edition of the King Report.

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Doug Noland: More Wackoism

Central banks win the day and week.

Markets have grown completely dependent on “Do Whatever it Takes” central control. And six years into a historic global experiment in central bank monetary stimulus, the maladjusted global economy has become dependent upon inflated (and dangerously speculative) securities markets. Meanwhile, the consequences of reckless “money” printing spur deepening social and political tensions. As more begin to question contemporary central bank doctrine, the issue of economic inequality is finally becoming an issue.

There are so many signs pointing to the present as an extraordinary juncture in history. For one, the misconceptions, flaws and unfolding failure of contemporary central banking are coming into clearer view. Yet fragilities associated with a flagging global Bubble ensure only more radical monetary measures. In the name of fighting “deflation” risk, everything has become fair game. God only knows how much “money” they might end up printing.

Doug's weekly Credit Bubble Bulletin is always worth your while---and I thank reader U.D. for bringing this week's edition to our attention.  It was posted on the prudentbear.com Internet site on Friday evening.

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Tiny house sets London record

A house in London the size of two parking spaces has sold for £275,000 ($501,962) in what is likely to be a record for a property that size in the British capital, one of the world's most expensive cities.

It is so small that the bed is suspended over the cooker and you have to clamber over the worktop to get to it.

"There were 33 viewings and five offers," a spokeswoman for estate agents Winkworth said on Thursday.

With 27 years of residential real estate sales under my belt, I recognize a wildly out of control real estate market bubble when I see one---and this one takes the cake.  The story is worth reading---and the photos of the of the 'home' will blow you away.  The article showed up on The Sydney Morning Herald website at 1:12 a.m. local time on their Saturday morning. I thank reader 'h c' for his second offering in today's column.

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E.U. makes Britain pay for recovery

David Cameron is fighting to stop Britain being forced to pay an extra £1.7 billion to the European Union due to the success of the British economy.

The Prime Minister was ambushed with a demand from the European Commission for the extra cash because Britain’s economy has performed better than other economies in Europe since 1995.

The bill is due on December 1 and Mr Cameron is particularly enraged because Brussels accountants are also preparing to give France back £790 million as its economy performed less well than Britain’s.

Tories have been stunned by the news which comes just weeks before the critical by-election in Kent next month, which they will fight against Ukip, and as the European Parliament seeks additional increases to next year’s EU budget, at a extra cost to British taxpayers of £680 million.

You couldn't make this stuff up!  This amazing must read article appeared on The Telegraph's website at 9:39 p.m. BST on their Thursday evening---and I thank reader 'h c' for his third contribution to today's column.

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French Unemployed Hits Record High, Hollande Demands E.U. Budget "Must Be Adapted"

France's President Francois Hollande states confidently that "everyone should respect treaties," then 'Junckers' it with this stunningly hypocritical bullshit, "budget rules must be adapted" to support growth and France "has done what it has to do" on its deficit... one glance at the following chart suggests that Hollande has done nothing and has been enabled by Draghi... What a farce!!

How long before Schaeuble explodes?

This short news item, with an excellent chart, appeared on the Zero Hedge website at 12:12 p.m. EDT yesterday---and I thank reader U.M. for sending it along.

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Merkel: Lifting Sanctions Against Russia Unnecessary

German Chancellor Angela Merkel said Friday that lifting sanctions against Russia was unnecessary.

"We do not find it necessary to speak about lifting sanctions against Russia," Merkel said on the sidelines of the European Summit in Brussels, as quoted by Deutsche Welle.

The German chancellor explained her position by citing the fact that the Minsk agreements have not been fully implemented. In particular, ceasefire is not observed in eastern Ukraine.

On September 19, representatives from Russia, Ukraine, the self-proclaimed Donetsk and Luhansk people's republics and the Organization for Security and Co-operation in Europe (OSCE) formulated a memorandum of nine provisions to regulate the implementation of a ceasefire agreement between Kiev and independence supporters in eastern Ukraine reached during the previous talks of the so-called Contact Group in Minsk on September 5. Since then, both the Kiev forces and independence fighters have been accusing each other of violating the truce.

This 4-paragraph story showed up on the RIA Novosti website at 3:11 p.m. Moscow time on their Friday afternoon---and I thank reader M.A. for sending it our way.

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Hungary's Orban stonewalls U.S. corruption allegations

Hungary is demanding the U.S. hand over evidence after the Americans placed an entry ban on six officials close to Viktor Orban’s government last week.

The Hungarian prime minister in Brussels on Friday (24 October) told reporters that his country would not launch any investigation into the corruption allegations on the six without first seeing some proof.

“Without evidence you cannot accuse anyone,” he said. One of the accused is reportedly his own special advisor.

Orban told this website he was not proud that Hungary was the first E.U. member state to have a US-entry ban on officials.  Normally being first is something to be proud of, "but not in this case", he said.

This longish story, filed from Brussels, showed up on the euobserver.com website at 6:04 p.m. Friday evening Europe time---and it's courtesy of Roy Stephens.

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Renzi stirs up E.U. row ahead of eurozone meeting

Eurozone leaders are meeting on Friday to discuss the issue of public deficits and debt, as France and Italy are in breach of the EU rules.

Ahead of the meeting, Italian Prime Minister Matteo Renzi stirred up a row with outgoing EU commission chief Jose Manuel Barroso, who criticised his decision to publish a commission letter warning him about the budget deficit.

Renzi said he could not understand Barroso's "surprise" about the published letter, given that the Financial Times and Italian media had already "anticipated" it.

"I think it's time for total and open transparency, the time has come to put an end to secret letters in this building. With Italy there will be total clarity about anything that comes from Brussels, because we think that's the only way to help citizens understand what is going on," Renzi told journalists on the margins of an EU summit.

This article is the second one in a row from the euobserver.com Internet site.  It was posted there at 9:27 a.m. Europe time on Friday---and it's also courtesy of Roy Stephens.

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Italy’s in terminal decline, and no one has the guts to stop it

Everything that’s wrong with France is worse here.

The Rome Opera House sacked its entire orchestra and chorus the other day. Financed and managed by the state, and therefore crippled by debt, the opera house — like so much else in Italy — had been a jobs-for-life trade union fiefdom. Its honorary director, Riccardo Muti, became so fed up after dealing with six years of work-to-rule surrealism that he resigned. It’s hard to blame him. The musicians at the opera house — the ‘professori’ — work a 28-hour week (nearly half taken up with ‘study’) and get paid 16 months’ salary a year, plus absurd perks such as double pay for performing in the open air because it is humid and therefore a health risk. Even so, in the summer, Muti was compelled to conduct a performance of La Bohème with only a pianist because the rest of the orchestra had gone on strike.

After Muti’s resignation, the opera house board did something unprecedented: they sacked about 200 members of the orchestra and chorus, in a country where no one with a long-term contract can be fired. It was a revolutionary — dare one say Thatcherite? — act. If only somebody would have the guts to do something similar across the whole of the Italian state sector. But nobody will. Italy seems doomed.

This longish essay appeared on the spectator.co.uk Internet site on Friday BST---and it's certainly worth reading if you have the time.  My thanks got out to South African reader B.V. for bringing it to our attention.

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Eastern Europe Shivers Thinking About Winter Without Gas

As winter approaches, former Soviet satellite nations from Poland to Bulgaria are watching Russia and Ukraine’s stalled gas negotiations with growing trepidation.

The lack of discernible progress is sending a collective shiver down the spine of Eastern Europe, which retains vivid memories of Russian energy cuts during unusually cold winters in 2006 and 2009. The ensuing shortages led to shuttered factories and a return to wood for heating and cooking in rural areas.

Despite the two episodes, little has been done to diversify supplies within a region that remains highly dependent on energy delivery systems dating back to the Soviet era.

If Moscow and Kiev don’t reach a compromise before winter and OAO Gazprom fails to restart supplies to its western neighbor, Ukraine may resort to siphoning off gas carried through its territory. As in 2009, that could prompt Russia to cut transit through Ukraine altogether, leaving parts of eastern Europe exposed to severe shortages.

This very interesting Bloomberg article, co-filed from Prague and Belgrade, was posted on their Internet site at 5:48 a.m. Denver time on Friday morning---and I thank reader U.M. for finding it for us.

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Russia detains airport staff after Total CEO's runway death

Russian investigators detained four more staff members Thursday at the Moscow airport where the CEO of French oil giant Total died when his plane collided with a snowplough.

Those detained include an intern air traffic controller, her supervisor, who was in charge of flights at the time, and the heads of the airport's air traffic controllers and runway cleaners.

Investigators had already detained the driver of the snowplough and a court hearing on Thursday was expected to sanction his arrest.

On Thursday, investigators said the 60-year-old Vladimir Martynenko had 0.6g (per litre) of alcohol in his blood, double the Russian drink-driving limit.

This news story put in an appearance on the france24.com Internet site on Thursday sometime---and I thank Roy Stephens for sending it.  There was also a story about this on the RIA Novosti website---and it's headlined "Moscow Court Arrests Air Traffic Controller in Fatal Plane Crash"---and it's courtesy of reader M.A.

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Putin accuses U.S. of causing global instability

Russian President Vladimir Putin has accused the U.S. of undermining global stability, and warned that the world will face new wars if Washington does not respect the interests of other nations.

During a speech in the Russian city of Sochi, the President argued that while Moscow does not see Washington as a threat, U.S. foreign policy has created chaos. Citing the wars in Iraq, Libya and Syria, he went on to accuse the U.S. and its allies of “fighting against the results of its own policy”.

“They are throwing their might to remove the risks they have created themselves, and they are paying an increasing price,” Putin told political experts at the Black Sea resort.

“I think that the policies of the ruling elite are erroneous. I am convinced that they go against our interests, undermine trust in the United States,” he said without offering specific examples.

This right-on-the-money  article was posted on the independent.co.uk Internet site on Friday---and it's the second offering of the day from reader B.V.

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How to Start a War and Lose an Empire

A year and a half I wrote an essay on how the U.S. chooses to view Russia, titled The Image of the Enemy. I was living in Russia at the time, and, after observing the American anti-Russian rhetoric and the Russian reaction to it, I made some observations that seemed important at the time. It turns out that I managed to spot an important trend, but given the quick pace of developments since then, these observations are now woefully out of date, and so here is an update.

At that time the stakes weren't very high yet. There was much noise around a fellow named Magnitsky, a corporate lawyer-crook who got caught and died in pretrial custody. He had been holding items for some bigger Western crooks, who were, of course, never apprehended. The Americans chose to treat this as a human rights violation and responded with the so-called “Magnitsky Act” which sanctioned certain Russian individuals who were labeled as human rights violators. Russian legislators responded with the “Dima Yakovlev Bill,” named after a Russian orphan adopted by Americans who killed him by leaving him in a locked car for nine hours. This bill banned American orphan-killing fiends from adopting any more Russian orphans. It all amounted to a silly bit of melodrama.

But what a difference a year and a half has made! Ukraine, which was at that time collapsing at about the same steady pace as it had been ever since its independence two decades ago, is now truly a defunct state, with its economy in free-fall, one region gone and two more in open rebellion, much of the country terrorized by oligarch-funded death squads, and some American-anointed puppets nominally in charge but quaking in their boots about what's coming next. Syria and Iraq, which were then at a low simmer, have since erupted into full-blown war, with large parts of both now under the control of the Islamic Caliphate, which was formed with help from the US, was armed with US-made weapons via the Iraqis. Post-Qaddafi Libya seems to be working on establishing an Islamic Caliphate of its own. Against this backdrop of profound foreign US foreign policy failure, the US recently saw it fit to accuse Russia of having troops “on NATO's doorstep,” as if this had nothing to do with the fact that NATO has expanded east, all the way to Russia's borders. Unsurprisingly, US–Russia relations have now reached a point where the Russians saw it fit to issue a stern warning: further Western attempts at blackmailing them may result in a nuclear confrontation.

The American behavior throughout this succession of defeats has been remarkably consistent, with the constant element being their flat refusal to deal with reality in any way, shape or form. Just as before, in Syria the Americans are ever looking for moderate, pro-Western Islamists, who want to do what the Americans want (topple the government of Bashar al Assad) but will stop short of going on to destroy all the infidel invaders they can get their hands on. The fact that such moderate, pro-Western Islamists do not seem to exist does not affect American strategy in the region in any way.

This long essay, posted on the Information Clearing House website on Tuesday, had to wait for today's column.  It falls into the absolute must read category, especially for all serious students of the New Great Game---and if I had to distill today's column down to just one article, this would be it!  I had three or four readers send me this piece this week, but the first one through the door was Rob Bentley.

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Turkey to Refrain From Sanctioning Russia: Turkish Ambassador to Russia

Turkish authorities do not intend to impose sanctions on Russia if asked by the United States or the European Union, Turkish Ambassador to Russia Umit Yardim told RIA Novosti on Friday.

"I do not see the Russian-Turkish relations within the framework of these sanctions [against Russia]. Russia-Turkey relations develop naturally and they are special in their own way. We will keep our relations that way," Yardim said.

"While I worked in Iran, I realized that sanctions are not a method that leads to expected results in politics. Turkey follows the decisions made by the U.N. It concerns not only Turkey but all U.N. member states," the ambassador added.

This brief news item showed up on the RIA Novosti website at 3:48 p.m. Moscow time on their Friday afternoon---and it's courtesy of reader M.A.

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Pepe Escobar: A Caliph in a wilderness of mirrors

He's invincible. He beheads. He smuggles. He conquers. He's the ultimate jack-of-all-trades. No Tomahawk or Hellfire can touch him. He always gets what he wants; in Kobani; in Anbar province; with the House of Saud (which he wants to replace) trying to make Putin (who he wants to behead) suffer because of low oil prices.

If this was a remake of Orson Welles's noir classic The Lady from Shanghai, in the mirror sequence the lawyer (American?) and the femme fatale (Shi'ite?) would also get killed; but The Caliph of Islamic State would survive as a larger than life Welles, free to roam, plunder and "give my love to the sunrise" - as in a Brave Caliphate World shining in "Syraq" over the ashes of the Sykes-Picot agreement.

He's winning big in Iraq's Anbar province. The Caliph's goons are now closing in on - of all places - Abu Ghraib; Dubya, Dick and Rummy's former Torture Central. They are at a mere 12 kilometers away from Baghdad International. A shoulder-launched surface-to-air missile (or MANPAD) away from downing a passenger jet. Certainly not an Emirates flight - after all these are trusted sponsors.

Hit, in Anbar province, is now Caliph territory. The police forces and the province's operational command have lost almost complete control of Ramadi. The Caliph now controls the crucial axis formed by Hit, Ramadi, Fallujah; Highway 1 between Baghdad and the Jordanian border; and Highway 12 between Baghdad and the Syrian border.

This longish but interesting essay appeared on the Asia Times website ten days ago---and after thinking about it over the last weekend, I decided to stick it in today's column, as it was too long and off-topic for a weekday column.  The last person to send it to me was South African reader B.V.

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The Secret Casualties of Iraq’s Abandoned Chemical Weapons

The soldiers at the blast crater sensed something was wrong.

It was August 2008 near Taji, Iraq. They had just exploded a stack of old Iraqi artillery shells buried beside a murky lake. The blast, part of an effort to destroy munitions that could be used in makeshift bombs, uncovered more shells.

Two technicians assigned to dispose of munitions stepped into the hole. Lake water seeped in. One of them, Specialist Andrew T. Goldman, noticed a pungent odor, something, he said, he had never smelled before.

He lifted a shell. Oily paste oozed from a crack. “That doesn’t look like pond water,” said his team leader, Staff Sgt. Eric J. Duling.

The specialist swabbed the shell with chemical detection paper. It turned red — indicating sulfur mustard, the chemical warfare agent designed to burn a victim’s airway, skin and eyes.

I am never sure anymore about the accuracy of the international stories that are posted on The New York Times website, as this paper is basically a propaganda machine for the U.S. government when required to be.  So keep that in mind when you read this---and it certainly is worth reading.  It was posted on their Internet site ten days ago---and I thank Dan Lazicki for sending it our way---and it's another article that had to wait for my Saturday column.

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The Zombie System: How Capitalism Has Gone Off the Rails

A new buzzword is circulating in the world's convention centers and auditoriums. It can be heard at the World Economic Forum in Davos, Switzerland, and at the annual meeting of the International Monetary Fund. Bankers sprinkle it into the presentations; politicians use it leave an impression on discussion panels.

The buzzword is "inclusion" and it refers to a trait that Western industrialized nations seem to be on the verge of losing: the ability to allow as many layers of society as possible to benefit from economic advancement and participate in political life.

The term is now even being used at meetings of a more exclusive character, as was the case in London in May. Some 250 wealthy and extremely wealthy individuals, from Google Chairman Eric Schmidt to Unilever CEO Paul Polman, gathered in a venerable castle on the Thames River to lament the fact that in today's capitalism, there is too little left over for the lower income classes. Former US President Bill Clinton found fault with the "uneven distribution of opportunity," while IMF Managing Director Christine Lagarde was critical of the numerous financial scandals. The hostess of the meeting, investor and bank heir Lynn Forester de Rothschild, said she was concerned about social cohesion, noting that citizens had "lost confidence in their governments."

It isn't necessary, of course, to attend the London conference on "inclusive capitalism" to realize that industrialized countries have a problem. When the Berlin Wall came down 25 years ago, the West's liberal economic and social order seemed on the verge of an unstoppable march of triumph. Communism had failed, politicians worldwide were singing the praises of deregulated markets and US political scientist Francis Fukuyama was invoking the "end of history."

This 4-part essay appeared on the German website spiegel.de late in the afternoon Europe time on their Thursday---and had to wait for today's column as well.  The first person to send me this long but worthwhile read was Roy Stephens.

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Assange: Google Is Not What It Seems

In June 2011, Julian Assange received an unusual visitor: the chairman of Google, Eric Schmidt, arrived from America at Ellingham Hall, the country house in Norfolk, England where Assange was living under house arrest.

For several hours the besieged leader of the world’s most famous insurgent publishing organization and the billionaire head of the world’s largest information empire locked horns. The two men debated the political problems faced by society, and the technological solutions engendered by the global network—from the Arab Spring to Bitcoin.

They outlined radically opposing perspectives: for Assange, the liberating power of the Internet is based on its freedom and statelessness. For Schmidt, emancipation is at one with U.S. foreign policy objectives and is driven by connecting non-Western countries to Western companies and markets. These differences embodied a tug-of-war over the Internet’s future that has only gathered force subsequently.

In this extract from When Google Met WikiLeaks Assange describes his encounter with Schmidt and how he came to conclude that it was far from an innocent exchange of views.

This very long and somewhat disturbing article appeared on the newsweek.com Internet site during the lunch hour on the east coast on Thursday.  It's certainly worth reading if you have the time---and as I skimmed parts of it, James Perloff's classic tome "The Shadows of Power: The Council on Foreign Relations and the American Decline" came to mind for the second time this week.  I thank Michael Cheverton for bringing this Newsweek article to our attention.

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Casey Research: Blood in the Streets to Create the Opportunity of the Decade

Gold stocks staged spring and summer rallies this year, but haven’t able to sustain the momentum. Many have sold off sharply in recent weeks, along with gold. That makes this a good time to examine the book value of gold equities; are they objectively cheap now, or not?

By way of reminder, a price-to-book-value ratio (P/BV) shows the stock price in relation to the company’s book value, which is the theoretical value of a company’s assets minus liabilities. A stock is considered cheap when it’s trading at a historically low P/BV, and undervalued when it’s trading below book value. From the perspective of an investor, low price-to-book multiples imply opportunity and a margin of safety from potential declines in price.

We analyzed the book values of all publicly traded primary gold producers with a market cap of $1 billion or more. The final list comprised 32 companies. We then charted book values from January 2, 2007 through last Thursday, October 15. Here’s what we found.

Well, dear reader, there's no question that blood is definitely running in the streets as far as the precious metals complex is concerned, but the only reason that it is, is because of the iron grip that JPMorgan et al are exerting in the Comex futures market at the moment.  But if you're standing around with money to invest, this is as close to the bottom as you're likely to get.  This commentary on gold stocks showed up on the Casey Research website yesterday.

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Platinum and palladium price Fixing settled - now for gold

It was announced a week ago by the London Platinum and Palladium Fixing Company Limited (LPPFCL) that the responsibility for administering a new electronic Fixing process for the two metals has been awarded to the now Hong Kong-owned London Metal Exchange (LME). 

The LPPFCL had previously announced the setting up of a Request for Proposal (RFP) following a review of its Fixing process at the end of July. This was with the aim of appointing a third party to assume responsibility for the administration of the Fixing in place of the LPPFCL. The recent announcement was that the LME had been selected and has committed to become the new administrator of the Fixing process. 

The LPPFCL is now finalising arrangements for the transfer of the administration of the Fixing to the LME with effect from 1 December 2014 while the LME has in the meantime developed a bespoke platform (LMEbullion) that will provide for the necessary electronic pricing solution. 

The LPPFCL had been administering the pricing system for the metals for the past 25 years utilising a closed telephone call system but had decided, in the light of doubts being cast on the integrity of the various precious metals fixing processes, to seek a new electronic answer to pricing the metals.

These changes are all smoke and mirrors, dear reader, because as long as JPMorgan et al are allowed to run rampant in the Globex trading system with impunity, nothing will change, as the 'fix' will always be in.  This article by Lawrence Williams appeared on the mineweb.com Internet site yesterday---and I thank Manitoba reader U.M. for her final contribution to today's column.

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CNBC's Rick Santelli and the Swiss gold vote

Rick wades into the gold issue in Switzerland---and his comments on it start at the 1:15 minute mark of this 2:24 minute CNBC video clip from yesterday.  I thank Mark Magarian for sending it our way.

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Paying people their worth in gold -- a first in Singapore

How would you like to be paid your worth in gold? Singapore-based precious metals dealer BullionStar is doing just that by rewarding staff with the commodity as salary, and it says it is the first in the country to do so.

Here is how it works: If, for example, you earn S$3,200 a month, you can choose to be paid in two gold bars each worth S$1,600. Theoretically, if you are a high earner drawing a pay of S$51,000 a month, you can choose to be paid with a one-kilogram gold bar.

Sales manager Vincent Tie is one of six employees at BullionStar who has opted to receive his salary in bullion. About 20 to 40 per cent of the 38-year-old's basic pay is given in gold.

"If I save in a paper currency in a bank, the interest paid to me cannot beat the rate of inflation, so essentially I am losing purchasing power. That means that I am buying less with my wealth," Mr Tie said about why he went for the heavy metal option.

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Oct 24, 2014

Warren Buffett loses $2.5 billion in three days on Coca-Cola and IBM

It's not been a good week for billionaire investor Warren Buffett, as his bet on Coca-Cola and American tech giant IBM have cost him more than $2 billion in just three days.

On Monday, Buffett lost nearly $1 billion after shares in IBM plummeted to a three-year low after it badly missed third-quarter earnings estimates and announced it would pay $1.5 billion to ditch its loss-making chip division.  That’s bad news for Buffett considering his investment firm, Berkshire Hathaway, is the largest investor in IBM.

Yesterday, Buffett's week of hell continued after Coca-Cola shares plummeted six per cent in New York trading after it reported flat sales and lowered its guidance for the year.

The set of disappointing results from both companies come after Buffett admitted he made a "huge mistake" investing in Tesco, which has seen its share price more than halve in the past 12 months following a series of profit warnings.

This article appeared on the independent.co.uk Internet site on Wednesday BST sometime---and today's first story is courtesy of reader 'h c'.

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Shrinking is the New Growth: CAT Did it Through Buybacks, Not Sales

Those who have been following Caterpillar actual top-line performance know that things for the industrial bellwether have been going from bad to worse, with not only retail sales declining across the globe, as documented here previously, but with the current stretch of declining global retail sales now longer than during what was seen during the Great Recession.

And yet, moments ago, CAT, which is a major DJIA component, just reported blow-away EPS of $1.72, far above the $1.35 expected. How did it achieve this stunning number which has pushed DJIA futures higher by almost half a percent?

Simple: first there was the usual exclusions, with “restructuring costs” adding back some $0.09 to the bottom line number.

But the punchline was this: “In addition to the profit improvement, we have a strong balance sheet and through the first nine months of the year, we’ve had good cash flow.  So far this year, we’ve returned value to our stockholders by repurchasing $4.2 billion of Caterpillar stock and raising our quarterly dividend by 17 percent,” Oberhelman said.”

This Zero Hedge piece showed up on David Stockman's website yesterday sometime---and it's the first offering of the day from Roy Stephens.  It's worth your time.

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Foreign central banks cut U.S. bond stakes to lowest since May

Foreign central banks slashed their holdings of U.S. Treasuries at the Federal Reserve to their lowest level since May, Fed data released on Thursday showed.

Analysts said the decline in U.S. government bond holdings likely stemmed from a combination of factors including booking profits on the recent rally in Treasuries, and the dollar which hit a four-plus year peak earlier this month.

"Some central banks might be selling dollars to arrest its rise against their currencies. While export-oriented countries typically like a stronger dollar, they don't want it go up too fast because they could make some imports very expensive," said Christopher Low, chief economist at FTN Financial.

This Reuters article appeared on their Internet site at 6:08 p.m EDT yesterday evening---and I found it in a GATA release that Chris Powell sent out just after midnight.

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Interest rates could stay low permanently, says Bank of England deputy governor

Interest rates could now be permanently lower, a prominent member of the Bank of England’s committee of interest rate setters has warned.

Ben Broadbent, deputy governor for monetary policy at the Bank of England, said on Thursday that the low level of interest rates has “recently fuelled talk of a “secular stagnation””.

He said that “rates are likely to stay low for some time yet”, while whether the downward path of interest is a “secular” phenomenon remains “anyone’s guess”.

The Bank of England’s Monetary Policy Committee (MPC) voted to maintain Bank rate at its historic low of 0.5pc this October, as policymakers voted 7-2 to keep rates on hold.

As Jim Rickards said some time ago---no interest increases ever again.   But Broadbent won't admit that its the interference of the central banks in the free market that caused this problem in the first place. This article appeared on the telegraph.co.uk Internet site at 9:29 a.m. BST on their Thursday morning.  This is the second offering of the day from reader 'h c'.

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Bank of England targets end of bank bail-out era

The Bank of England could fire bank bosses on the spot and replace them with outside executives should the bank collapse under new rules designed to prevent taxpayers bailing out banks.

The Bank would step in and take control of a failing bank over a 48-hour period, usually a weekend, and decide how to deal with it in order to protect customers.

Instead of the Government stepping in, long-term bondholders would exchange debt for equity in the bank under a so-called “bail-in” method should it collapse.

If these methods, which were detailed by the bank on Thursday, had been in place when RBS went under in 2008, not a single penny of taxpayer funds would have been used to rescue the bank.

Ah, yes---preparing for the next collapse of the banking system in England---and soon to show up in your country as well.  This article appeared on The Telegraph's website at 4:14 p.m. BST yesterday---and I thank U.K. reader Tariq Khan for sharing it with us.

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E.U. Banking Stress Tests: 'Far-Reaching Reforms Are Needed'

On Sunday, Europe will release the results of its banking stress tests. In an interview, former PIMCO head Mohamed El-Erian speaks with SPIEGEL about what to expect and how Europe's core countries are failing to adequately confront a flagging economy.

SPIEGEL: Mr. El-Erian, the results of the stress test on European banks will be published on Sunday. If you had a billion dollars to bet for or against European banks, what would you do?

El-Erian: Stock markets are altogether overvalued; people took risks in financial markets that were too high. Banking stocks often exaggerate the development: If stock markets rise, bank shares rise higher. If stock markets fall, they fall deeper. Therefore, I would buy neither stocks nor bank bonds prior to a correction. I would focus on highly secured banking bonds.

SPIEGEL: How poorly are Europe's banks doing?

El-Erian: Soon, banks will no longer be the biggest risk to the financial system and the economy. And five years from now, many credit institutions will be smaller than they are today, having discontinued some types of business, and will better support the real economy.

This short interview was posted on the German website spiegel.de at 4:48 p.m. Europe time on their Thursday afternoon---and it's worth reading.  It's the second contribution of the day from Roy Stephens.

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Could France sell the Mona Lisa to pay off its debts?

France is in debt to the tune of 2,000 billion euros. Could selling off the country’s art make a dent in that figure?

Leonardo da Vinci’s Mona Lisa is probably the best known work of art in the world.  Her enigmatic smile beams down on hundreds of thousands of tourists a year at the Louvre Museum in Paris.

She could also bring a smile to France’s cash-strapped government if a sale could ease the national debt.

Heavily-indebted Portugal is doing something similar, putting its state-owned collection of Miro paintings up for sale.

This very interesting article showed up on the france24.com Internet site way back on September 2---and I thank reader M.A. for digging it up for us.

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Barroso clashes with Italy over published budget warning

European Commission president Jose Manuel Barroso has hit out at Italy for publishing a letter the commission sent asking Rome to justify its budget for 2015.

"It was a unilateral decision by the Italian government to publish the letter on the finance ministry's website. The commission was not in favour of that letter being made public," Barroso said on Thursday (23 October).

The letter, sent Tuesday, says Italy's draft budget, submitted last week along with other national budgets for review in Brussels, "plans to breach" the debt and deficit rules underpinning the euro.

"According to our preliminary analysis Italy plans a significant deviation from the required adjustment path towards its medium-term budgetary objective," says the letter.

This news item, filed from Brussels, appeared on the euobserver.com Internet site at 3:32 p.m. Europe time yesterday afternoon---and I thank Roy Stephens for sending it.

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Blackwater contractors convicted

A federal jury here on Wednesday convicted one former Blackwater contractor of murder and three of his colleagues of voluntary manslaughter in the deadly shootings of 14 unarmed civilians killed in Baghdad's Nisour Square seven years ago. The judge in the case ordered the men detained pending sentencing.

The massacre, which resulted in a wave of popular anger in Iraq against the United States, and especially the army of private security contractors which it employed there, contributed heavily to the Iraqi government's later refusal to sign an agreement with Washington to extend the US military presence there.

It also sealed the reputation of Blackwater, a "private military" firm headed by Erik Prince, a right-wing former Navy Seal, as a trigger-happy mercenary outfit whose recklessness and insensitivity to local populations jeopardized Washington's interests in conflict situations.

Seven years is better than never, I suppose.  This Asia Times article appeared on their website yesterday sometime---and I thank reader M.A. for sliding it into my in-box very late last night MDT.

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China Cuts Saudi Oil Imports Amid Colombia Shipment Boost

China reduced oil imports from Saudi Arabia even as the world’s largest crude exporter cuts prices to lure Asian customers amid intensifying competition from Colombia to Oman.

Oil deliveries from Saudi Arabia fell 2.7 percent to 4.74 million metric tons last month from a year earlier, according to data released today by the General Administration of Customs in Beijing. Shipments from Colombia surged 389.6 percent, while Russian deliveries increased by 56.8 percent.

Asian consumers are benefiting from a wider choice of suppliers offering cheaper crude, from Venezuela to Alaska and Nigeria, as the highest U.S. production in almost 30 years cuts American demand. Saudi Arabia reduced prices for oil for Asia to the lowest in almost six years as it aims to maintain market share even as global benchmark prices have dropped about 25 percent from June.

“Chinese refiners are favoring supplies from Oman and South America over Saudi Arabia as their prices relative to output are more competitive,” Amy Sun, an analyst with Shanghai-based ICIS-C1 Energy, a consultant, said by phone from Guangzhou. “China is also increasing imports from Russia with a new contract signed last year.”

This Bloomberg news story, filed from Shanghai, showed up on their website at 4:05 a.m. Denver time on Wednesday morning---and I thank South African reader B.V. for sending it our way.

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China's economic growth slows to 7.3%, near six-year low

China's economic growth cooled to 7.3 per cent between July and September from a year earlier, the weakest expansion since the global financial crisis and reinforcing expectations that Beijing will need to roll out more stimulus to avert a sharper slowdown.

With a faltering property market increasingly dragging on manufacturing and investment, the reading was the slowest for the world's second-largest economy since early 2009, when the growth rate tumbled to 6.6 per cent.

Economists polled by Reuters had expected third-quarter growth to cool to 7.2 per cent from 7.5 per cent in the second quarter, adding to worries about flagging global growth which have sent financial markets tumbling in recent weeks.

On a quarter-on-quarter basis, growth eased to 1.9 per cent versus expectations of 1.8 per cent and down from 2.0 per cent in the second quarter.

This article put in an appearance on The Sydney Morning Herald website on their Tuesday---and it's the third and final contribution of the day from reader 'h c'.

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Whitlam and Australia's forgotten coup

John Pilger marks the death of former Australian prime minister Gough Whitlam with the one story missing from the 'tributes' to a man whose extraordinary political demise is one of America's dirtiest secrets.

Across the political and media elite in Australia, a silence has descended on the memory of the great, reforming prime minister Gough Whitlam, who has died. His achievements are recognised, if grudgingly, his mistakes noted in false sorrow. But a critical reason for his extraordinary political demise will, they hope, be buried with him.

Australia briefly became an independent state during the Whitlam years, 1972-75. An American commentator wrote that no country had “reversed its posture in international affairs so totally without going through a domestic revolution”. Whitlam ended his nation’s colonial servility. He abolished Royal patronage, moved Australia towards the Non-Aligned Movement, supported “zones of peace” and opposed nuclear weapons testing.

Although not regarded as on the left of the Labor Party, Whitlam was a maverick social democrat of principle, pride and propriety. He believed that a foreign power should not control his country's resources and dictate its economic and foreign policies. He proposed to "buy back the farm". In drafting the first Aboriginal lands rights legislation, his government raised the ghost of the greatest land grab in human history, Britain’s colonisation of Australia, and the question of who owned the island-continent’s vast natural wealth.

I came close to deleting this before I'd even read it, but once I had, I'm happy to present it to you today.  This falls into the absolute must read category---and it was posted on the Hong Kong Internet site Asia Times yesterday.  I thank Roy Stephens for sharing it with us.

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Climate change proved to be 'nothing but a lie', claims top meteorologist

The debate about climate change is finished - because it has been categorically proved not to exist, one of the world's leading meteorologists has claimed.

John Coleman, who co-founded the Weather Channel, shocked academics by insisting the theory of man-made climate change was no longer scientifically credible. 

Instead, what 'little evidence' there is for rising global temperatures points to a 'natural phenomenon' within a developing ecosystem.

In an open letter attacking the Intergovernmental Panel on Climate Change, he wrote: "The ocean is not rising significantly."

"I have studied this topic seriously for years. It has become a political and environment agenda item, but the science is not valid."

Amen to that, dear reader!  This article appeared on the express.co.uk Internet site on Thursday sometime---and I consider it well worth reading.  I thank reader M.A. for bringing it to my attention---and now to yours.

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Market Update: #HeartofGold & Gold Symposium Update

Last week, ABC Bullion was delighted to attend the 7th annual Gold Investment Symposium, which was held at the Sofitel Sydney Wentworth Hotel. As we have for the past few years now, we were proud to sponsor the event alongside our sister company Custodian Vaults, and were delighted to catch up with not only a number of key industry contacts, but also to talk to many of the attendees, including a large number who are clients of ABC Bullion.

Considering the general pessimism and apathy regarding gold as an investment right now, attendance was not as high as it was back in 2011 when gold was threatening to push through the USD $2000oz mark.

From a contrarian perspective, this is of course encouraging news, and whilst no one was denying or attempting to gloss over the pain that the last three years has brought, their was a general perception that maybe, just maybe, the precious metal community has weathered the worst of this corrective storm, and there will be more profitable times ahead.

Some news from "the land down under"---as we don't hear much from them.  It was posted on the abcbullion.com.au Internet site eight days ago---and my thanks go out to Wesley Legrand for sharing it with us.

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First Majestic CEO wants silver miners to form counter-cartel against futures shorters

First Majestic Silver CEO Keith Neumeyer, interviewed by Future Money Trends, argues that silver miners should form a counter-cartel to combat the investment houses selling silver short on futures markets.

My congratulations to Keith Neumeyer and Co. for stepping up to the plate on this issue.  I certainly hope that silver producers both big and small will rally around the flag that First Majestic has planted in the ground here, especially the producers based out of Vancouver.

This call to arms is not without dangers though, as Vancouver-based producers such as Pan American Silver and Silver Standard Resources will certainly not support such an initiative, as their masters at The Silver Institute wouldn't allow it.  Let's see what happens---but for moment I thing we should all be grateful to Keith, along with the entire organization, for having the gonads to do what was necessary. 

And if you want to help out here, you should contact the I.R. departments of any silver companies that you own shares in.  A few keystrokes into your computer's search engine will bring up the required 1-800 number or e-mail address---and be polite, but forceful---and don't procrastinate, do it NOW!

The interview runs for 15:41 minutes---and can be heard at their website linked here.  I found this in a GATA release posted on their Internet site very late last night.

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Chris Powell: The crucial questions financial journalism won't ask and central banks won't answer

Remarks by Chris Powell, Secretary/Treasurer, Gold Anti-Trust Action Committee Inc...New Orleans Investment Conference...Thursday, October 23, 2014

For many years this conference has bravely invited GATA Chairman Bill Murphy and me to speak here about the evidence of manipulation of the gold market, particularly manipulation undertaken directly or indirectly by central banks, and every year there has been new documentation to report. This documentation has been compiled at GATA's Internet site, GATA.org.

The last two months have brought confirmation that, as we long have suspected, GATA has outlined only a small part of the surreptitious market manipulation being undertaken by central banks -- that this manipulation is actually comprehensive, that it covers nearly every major market in the world.

This confirmation is largely the work of Eric Scott Hunsader, founder of the market data and research company Nanex in Winnetka, Illinois, who publicized, through the Zero Hedge Internet site, documents recently filed with the U.S. government, two of them with the Commodity Futures Trading Commission and one with the Securities and Exchange Commission.

The first document is a letter to the CFTC, dated January 29 this year, from CME Group, the operator of the major futures exchanges in the United States, and signed by CME Group's managing director and chief regulatory counsel, Christopher Bowen: The letter notifies the CFTC of changes to CME Group's discount trading program for central banks. That is, the letter reveals that central banks are getting discounts for trading all futures on CME Group's exchanges, including the New York Commodity Exchange, the major mechanism for "price discovery" in the monetary metals.

This speech that Chris gave yesterday in New Orleans falls into the absolute must read category, so top up your coffee and have at it.  It was posted on the gata.org Internet site late last night.

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Oct 23, 2014

Kyle Bass warns Q.E. end will shake up markets

Central banks meeting next week will expose a huge divergence in monetary policy between several major economies, putting the macro environment in focus and weighing on foreign exchange, hedge fund manager Kyle Bass said Wednesday.

The founder of the $1.7 billion hedge fund Hayman Capital thinks the Fed likely will taper its bond-buying stimulus to zero next week. The Bank of Japan, however, likely will announce it will do whatever it takes to prevent the world's third-largest economy from heading into a major crisis.

"They still run 10 percent fiscal deficits. We think they're going to run a current account deficit of 2 to 4 percent next year and Japan is going to have to buy more bonds and the U.S. is going to buy no more," Bass said on "Squawk on the Street." "And so when the training wheels come off the market in central bank land, macro becomes functionally much more relevant."

There are three CNBC video clip with Kyle that run concurrently.  In total, all three run for 7 minutes.  They showed up on their website around 9 a.m. EDT on Wednesday morning.  They're worth watching.  I thank reader David Ball for today's first story.

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McDonald's Franchisees Say the Company is Bankrupting Them

McDonald's franchisees are furious that the company's aggressive promotions and costly restaurant upgrades are squeezing their profits, according to a new survey.

"Growth for McDonald's is over," one franchisee wrote in response to the survey by the financial services firm Janney Capital Markets.

"I am just hoping to be flat," another franchisee said. "[The] customer has lost faith in the brand."

"We are leaderless," said a third. A fourth franchisee complained, "They are being successful in bankrupting us."

This very interesting news item appeared on the businessinsider.com Internet site at 4:48 p.m EDT on Monday---and it's courtesy of reader Brad Robertson.

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Manufacturing moving from China to U.S. - survey

Large manufacturers are increasingly moving production back to the United States from China, according to a new report by The Boston Consulting Group released Thursday.

In the third annual survey of US-based senior executives at manufacturing companies with annual sales of at least $1 billion, the number of respondents who said their companies were currently reshoring to the U.S. from China increased 20 percent from a year ago.

Given the fact that China's wage costs are expected to grow, do you expect your company will move manufacturing to the United States?" the August survey asked executives at an unspecified number of companies that currently manufacture in China.

The executives who said "Yes, we are already actively doing this" rose to roughly 16 percent in the "Made in America, Again" survey in August from 13 percent a year earlier and seven percent in the first survey in the series, in February 2012.

This AFP news item appeared on the france24.com Internet site at 9:05 a.m. Europe time this morning---and I thank South African reader B.V. for sliding it into my in-box shortly before I filed today's column.

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Fed spotted JPMorgan 'Whale' risks years before scandal: inspector

The Federal Reserve's New York branch knew about risks JPMorgan Chase & Co was taking with its massive "London Whale" derivatives bets four years before they imploded, but it failed to act properly to head them off, the U.S. central bank's inspector general said.

The Fed's Office of Inspector General said on Tuesday one of the key flaws it uncovered in its probe of the 2008 transaction at the Wall Street bank was the New York Fed's over-reliance on certain personnel who left the supervisory team in 2011. That created a "significant loss of institutional knowledge" within the team assigned to inspect JPMorgan, the report said.

In what amounts to another recent black eye for the New York Fed's bank supervision unit, the report also noted that competing supervisory priorities and limited resources contributed to a failure to conduct key follow-up examinations.

This Reuters article, co-filed from New York and Washington, put in an appearance on their Internet site at 1:59 p.m. EDT on Tuesday afternoon---and it's a story I found in yesterday's edition of the King Report.

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All the Markets Need is $200 Billion a Quarter From the Central Bankers

The central-bank put lives on.

Policy makers deny its existence, yet investors still reckon that whenever stocks and other risk assets take a tumble, the authorities will be there with calming words or economic stimulus to ensure the losses are limited.

A put option gives investors the right to sell their asset at a set price so the theory goes that central banks will ultimately provide a floor for falling asset markets to ensure they don’t take economies down with them.

Last week as markets swooned again, it was St. Louis Federal Reserve President James Bullard and Bank of England Chief Economist Andrew Haldane who did the trick. Bullard said the Fed should consider delaying the end of its bond-purchase program to halt a decline in inflation expectations, while Haldane said he’s less likely to vote for a U.K. rate increase than three months ago.

Just a softer way of saying the President's Working Group on Financial Markets, now shortened to the Plunge Protection Team.  This Bloomberg offering, filed from London, showed up on their Internet site at 5:18 a.m. Mountain Daylight Time on Tuesday morning---and it's the second item in a row that I plucked from yesterday's edition of the King Report.

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Currency wars are back: 'Export your deflation to someone else'

Brazil Finance Minister Guido Mantega popularized the term “currency war” in 2010 to describe policies employed at the time by major central banks to boost the competitiveness of their economies through weaker currencies. Now, many see lower exchange rates as a way to avoid crippling deflation.

Weak price growth is stifling economies from the euro region to Israel and Japan. Eight of the 10 currencies with the biggest forecasted declines through 2015 are from nations that are either in deflation or pursuing policies that weaken their exchange rates, data compiled by Bloomberg show.

“This beggar-thy-neighbor policy is not about rebalancing, not about growth,” David Bloom, the global head of currency strategy at London-based HSBC Holdings Plc, which does business in 74 countries and territories, said in an Oct. 17 interview. “This is about deflation, exporting your deflationary problems to someone else.”

This Bloomberg news item, filed from London, appeared on their Internet site at 8:24 a.m. Denver time yesterday morning.  It---and the headline---were something I found at the gata.org Internet site.

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Why it’s now too late for Germany to rescue the eurozone alone

The eurozone is yet again in a nasty state.

As it suffers from low growth and low inflation, the two combine to make a nasty cocktail. Without much of either, unemployment remains stuck at an eye-watering high 11.5pc, and government debt burdens are likely to feel increasingly heavy.

The European Central Bank (ECB) has announced a variety of acronyms - CBPP3, TLTROs, and an ABS purchase scheme - all stimulus measures designed to combat the euro area’s low inflation crisis.

Yet so far, they’ve been insufficient to raise expectations of future inflation, implying that the firepower just isn’t strong enough. Economists are hoping that the ECB will deploy outright quantitative easing, and start buying up the sovereign bonds of eurozone governments.

This article appeared on the telegraph.co.uk Internet site at 2:14 p.m. BST on their Wednesday afternoon---and it's courtesy of South African reader B.V.

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France moves to make presidents impeachable

The French parliament voted Tuesday in favour of a draft law that could, for the first time, make it possible to remove the country’s president from office through a US-style impeachment.

The bill, already passed by France’s lower house, was approved by the Senate by 324 votes to 18.

It will now go to France’s Constitutional Council, which must decide if the bill complies with the French constitution, before becoming law.

If approved, the law would represent a radical change to the legal status of the French head of state – who has so far enjoyed greater legal protection than almost any other Western leader.

This news item was posted on the france24.com Internet site yesterday---and it's the second offering in a row from reader B.V.

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Christophe de Margerie: Total’s mustachioed maverick

Asked in 2010 if oil companies were right to make deals with the world’s despots and dictators, Christophe de Margerie, the boss of Total who died in a plane crash in Russia Monday night, gave a typically unequivocal answer: “bloody right.”

It was a reply that summed up a man unapologetic about doing whatever was necessary to keep the oil and profits flowing, no matter the opinion of the public, politicians or regulators.

De Margerie’s bushy, walrus-like facial hair earned him the nickname “Big Moustache”, but in his younger years he went by a different sobriquet – “Mr Middle East” – heading Total’s operations in that area from 1995.

It was a job that saw him scour for oil in some of the world’s most politically volatile places and made him a natural choice to head the French oil giant’s exploration and production department when the role became vacant in 2002.

This very interesting but longish commentary/obituary appeared on the france24.com Internet site on Tuesday Europe time---and it's the fourth article of the day from reader B.V.

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Ukraine's multi-billion dollar gas debt: Who pays?

Ukraine plans to buy $770 million worth of gas (2 billion cubic meters) from Russia this winter to keep the heat on. The question is: who is going to pay the bill?

All three parties, Russia, the E.U., and Ukraine met in Brussels on Tuesday and confirmed Kiev will pay $385 per 1,000 cubic meters of Russian supplied gas through the end of March. Before Ukraine can start purchasing gas, they need to pay off $1.45 billion in debt.

“There’s one obstacle: Ukraine failed to pay for Russian-supplied gas for seven months,” Oettinger said Tuesday. It will be difficult for Ukraine to find a benefactor, since, as Oettinger pointed out, its credit history is less than stellar. The economy is in ruin and may already need extra IMF money to stay afloat.

This Russia Today article showed up on their website at 2:53 p.m. Moscow time on their Internet site yesterday---and I thank Roy Stephens for sending it our way.  Reader Jim Skinner sent a story from the fortune.com Internet site on this issue.  It's headlined "Russia calls Europe's bluff on Ukraine gas deal."

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Russia says Ukraine should find money to pay for gas within a week

Ukraine should be able to find ways of paying for Russian gas supplies within a week, Russian Energy Minister Alexander Novak said on Wednesday, suggesting a standoff would end once Moscow received financial guarantees from Kiev.

The latest round of gas talks between Moscow and Kiev ended late on Tuesday in Brussels with no agreement in a dispute that prompted Russia to cut off gas supplies to its neighbor in mid-June, potentially hurting flows west to the European Union.

But while Novak said he was optimistic for new talks on Oct. 29, Ukrainian Prime Minister Arseny Yatseniuk said he was skeptical about building ties with Russia, underlining how efforts to reach a deal are hampered by a wider political conflict between the two countries.

Another conflicting story on Ukraine's gas issue.  This Reuters article, filed from Moscow, was posted on the their website at 7:14 a.m. EDT on Wednesday---and it's the second offering of the day from reader Jim Skinner.

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Russia Loses Oil Ally in de Margerie after Moscow Crash

Christophe de Margerie’s last act as chief executive officer of Total SA left no room for doubt about his feelings toward Vladimir Putin’s Russia.

In a Moscow speech hours before the plane crash that took his life two days ago, de Margerie said U.S. and European Union sanctions on the country were “unfair and unproductive,” and that he opposed efforts to render it “isolated from the major global economic and political process.”

Appearing before a receptive audience that included Prime Minister Dmitry Medvedev and a host of Russian executives, he cited his work as co-chair of a Franco-Russian business body alongside Gennady Timchenko -- a commodities billionaire who was one of the first targets of U.S. sanctions.

De Margerie’s death removes from the scene a businessman who rarely shied away from geopolitical debates and became one of Russia’s most outspoken allies in its efforts to avoid economic quarantine, willing to say what others only dared think. Although European corporate giants from Siemens AG to Renault SA have built close relationships with Russia, most business leaders have preferred to keep their lobbying private to avoid offending governments committed to punishing Putin.

This very interesting Bloomberg article appeared on their website at 6:24 a.m. MDT yesterday---and I thank reader M.A. for sending it.

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Good fundamentals make ruble ‘stable’ currency - Russian Central Bank

Russia’s currency has taken a significant 20 percent plunge this year against the dollar and euro, but analysts are confident that Russia’s sturdy stash of foreign reserves and miniscule external debt make the ruble one of the ‘most stable’ currencies.

Russia’s vast gold and foreign currency reserves will help weather the ruble’s rough patch. At more than $450 billion, they are the third largest reserves in the world.

"We believe that the fundamental factors that determine the value of our currency were unchanged. Fundamentally the balance of our budget, the absence of significant external debt of our state. Precisely because of this ruble is one of the most stable currencies," Deputy Chairman of the Bank of Russia, Mikhail Sukhov, told TASS Wednesday.

The Central Bank has already spent more than $10 billion in October to stymie the ruble’s fall, and $50 billion since the beginning of the year. However, the bank has signaled it won’t continue to prop up the ruble with billions more.

This must read article appeared on the Russia Today website at 4:16 p.m. Moscow time on their Tuesday afternoon---and it's the final offering of the day from Roy Stephens.

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U.S. Embassy in Baghdad Shelled With Rockets: Reports

The U.S. Embassy in Iraq located in central Baghdad has been shelled with rockets, Al-Mustakillah news agency reported Wednesday citing a security source.

"On Tuesday night the US Embassy was hit with three rockets. They were fired from a park area in the Dora district [in southern Baghdad]," the agency's source said.

Earlier on Tuesday, Al-Sumaria TV channel reported a mortar shelling of the so-called "green zone" in the center of the capital, housing government buildings and foreign missions. Security forces surrounded the area to repel a potential attack.

The above three paragraphs are all there is to this brief story that appeared on the RIA Novosti website yesterday at 2:02  p.m. Moscow time.  It's the second offering of the day from reader M.A.

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Big nations snub Beijing bank launch after U.S. lobbying

China will officially launch a new $50 billion Asia Infrastructure Investment Bank on Friday as it steps up its challenge to global financial institutions like the World Bank that it feels are dominated by America and its allies.

But only 20 mostly small economies, many of them effectively client states of China, will become founding members of the bank at Friday's ceremony in Beijing after Washington lobbied furiously to stop other countries from signing up.

When it first unveiled its plan to establish the bank last year, Beijing extended a broad invitation and several European states, as well as Australia, Indonesia, and South Korea initially showed interest.

But thanks to pressure from the US -- conveyed by US diplomats in Beijing, Washington, and other capitals -- none of these countries will join the bank at this stage, although some are hoping to be involved later.

This Financial Times article, which is worth reading, appeared on their website yesterday---and it was posted in the clear in this GATA release.

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Nelson Bunker Hunt, 88, Oil Tycoon With a Texas-Size Presence, Dies

Nelson Bunker Hunt, the down-home Texas oil tycoon who owned a thousand race horses, drove an old Cadillac and once tried to corner the world’s silver market only to lose most of his fortune when the price collapsed, died on Tuesday in Dallas. He was 88.

His death, at an assisted living center, followed a long period of treatment for cancer and dementia, The Dallas Morning News reported.

“A billion dollars ain’t what it used to be,” he said in 1980 after silver stakes he had amassed with two brothers, Herbert and Lamar, fell to $10.80 from $50.35 an ounce. In barely two months, their holdings and contracts for purchases — corralling a third to half the world’s deliverable silver — had plunged from a $7 billion value in January to a $1.7 billion loss in March.

With the Hunts unable to cover enormous margin calls, the debacle endangered financial markets and brokerage houses, forcing federal regulators and the nation’s banks to step in with a $1 billion line of credit, a bailout that saved the system from a stampede and the Hunts from a meltdown.

This very interesting fairy tale, at least considering what's mentioned in the above four paragraphs, showed up on The New York Times website yesterday---and I thank Casey Research's BIG GOLD editor, Jeff Clark, for bringing it to my attention---and now to yours.  It's worth reading---but I hope its written with less bias than their reporting on the Ukraine/Russia situation.  For that reason you should read it with your b.s. meter on its most sensitive setting.

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Gold Is Undervalued – Ned Goodman

Ned Goodman, president and chief executive officer of Dundee Corp., believes gold is undervalued while equities are poised for a crash.

Speaking at a keynote luncheon at the Quebec Mining Exploration Xplor 2014 Convention in Montreal, Quebec, Goodman was blunt regarding gold prices and where they’re heading.

“We think gold is very undervalued at current gold prices,” Goodman said. “I think gold will hit $1,200, and when it does, be a buyer because I think that will be a good place to be.”

Touching on stock markets, Goodman didn’t pull any punches, calling it a Botox market where all deficiencies are simply covered and propped up to look healthy.

This story appeared on the kitco.com Internet site yesterday at 2:38 p.m. EDT yesterday---and it's the second contribution in a row from BIG GOLD editor Jeff Clark.

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Keith Barron, PhD: "I believe we’ve seen Peak Gold*"

On behalf of Matterhorn Asset Management, financial journalist Lars Schall talked with exploration geologist and mining entrepreneur Dr. Keith Barron.

Keith is a scientist and he explains in no uncertain terms what is going on in the mining industry, the false accounting relative to the cost of exploration, what happened when gold went up to 1,900, why gold versus USD simply must go to at least 5,000, why ‘gold above ground’, if anything, is overstated and why the Swiss Gold Initiative is indeed very important and not just for the Swiss People, as well as Keith Barron’s view on Silver.

Barron is a day late and a dollar short on this topic, as several other gold commentators/mining executives have already been down this road already this year.  This 47:17 minute interview was posted on the goldswitzerland.com Internet site yesterday---and I found it in a GATA release.

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Gold miners' outstanding forward sales jump 61 percent in Q2/14 - report

The volume of gold sold forward by mining companies jumped 61 percent in the second quarter after Russia's Polyus Gold added a major new hedge position, an industry report showed on Wednesday.

In their quarterly Global Hedge Book Analysis, released on Wednesday, Societe Generale and GFMS analysts at Thomson Reuters said they are predicting net hedging for the year of 40 tonnes, the most since 1999.

They forecast in July that gold producers would return to net hedging this year for the first time since 2011.

Volumes of hedging predicted for this year are still well below the levels seen in the late 1990s. Net producer hedging in 1999 reached 506 tonnes, according to GFMS data.

I'm sure you've heard the expression "much ado about nothing."  Well, despite the headline, that's what this Reuters story is.  However, it's worth your while as a trip down memory lane---and I thank Manitoba reader U.M. for sending it.

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Goldcorp chief says Asian buying will support price of gold

Demand from China and other parts of Asia will support the price of gold, the chief executive of one of its largest miners said, as the precious metal traded near its strongest level in six weeks.

Chuck Jeannes of Goldcorp said he saw "as much clarity in the market as there has ever been," with a "floor" created by strong demand whenever gold reached or fell below about $1,200 per ounce.

"The anecdotal evidence is that gold goes down and physical demand goes up," Mr. Jeannes said in an interview with the Financial Times. "A huge number of physical buyers in the world see gold as a bargain below $1,200."

You wonder how people such as him make it to positions of responsibility when they don't know anything about how their product is priced in the market---and run screaming when you attempt to explain it.  The above three paragraphs from a Financial Times article from yesterday, is all that's posted in the clear in this GATA release.  The rest is subscriber protected.

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Koos Jansen: It's official -- China's gold demand in 2013 was 2,199 tonnes

The China Gold Association has confirmed that China's gold off-take in 2013 reached 2,200, Bullion Star market analyst and GATA consultant Koos Jansen reported yesterday. That would constitute most of world gold mine production and the figure apparently does not include purchases by the People's Bank of China, which remain the most sensitive state secret.

"Why the Western media don't report on these numbers is a mystery," Jansen writes. "This data is not a secret. Yet the Chinese have been trying to hide it as much as possible---and it looks like either they're being helped by Western institutions, or these institutions are ignorant."

Of course there is still another explanation: that Western financial news organizations and the World Gold Council very much intend not to deal with this issue honestly, since doing so would impugn the whole Western financial system, built as it is on currency and commodity market rigging.

This must read commentary was posted on the Singapore website bullionstar.com on Tuesday---and this is another gold-related news item I found posted on the gata.org Internet site.

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This Dhanteras, gold coins are in, jewellery is out

Instead of the usual rush for jewellery, this Dhanteras sees a reversal of buyer's preferences, with more people opting for the traditional gold coin. We talk to some shopkeepers and buyers to understand this shift in choices

For many families in the city, a visit to their family jeweller today is as important as lighting lamps on Diwali. Jewellers too look forward to the festival of Dhanteras all year long, in the hope of making up for slow sales and the lean months. Unlike last year, this Dhanteras, the gold rate is lower compared to the last few months, which has given many store owners hope for a busy shopping day today.

But in an interesting twist, the low gold rate hasn't motivated people to increase their Dhanteras budget and buy jewellery instead of the traditional gold coins. Shoppers told DT why they would prefer to wait for the remaining festive days to pass before making any major ornamental purchases and why they will stick to the traditional coin purchases instead. Crowded shops, busy salespeople and `formality shoppers' make Dhanteras a bad day for investing in jewellery because like they say, buying an ornament is an experience that can be done once the hustle and bustle of Diwali is over.

This article showed up on the Times of India website at 11:41 a.m. IST on Tuesday---and I thank reader U.M. for finding it for us.

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Kolkata’s gold panners reap rewards at India festival time

As 40-year-old Mohammed Iqbal sifts through sludge in the back alleys of Kolkata’s jewellery market for gold dust, his weathered face brightens slightly at the recent uptick in work.

For generations, the city’s group of “newaras” — gold dust scavengers — have been scratching a living by panning for fine particles swept from the 2,000-odd jewellery workshops operating in the alleys.

Iqbal estimates he normally earns just 150 to 200 rupees ($2.40 to $3.20) a day from selling flecks of the precious metal that he painstakingly finds on the ground and in the drains of the grimy alleys.

But the onset of India’s raucous festival season, especially the biggest Hindu celebration of Diwali on Thursday, brings a relative bonanza for Iqbal, with his income more than doubling.

This extremely interesting AFP story appeared on the aquila-style.com Internet site early yesterday morning EDT---and I thank reader U.M. for sliding it into my in-box late yesterday evening MDT.  It's also her final contribution to today's column.

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Huge, honkin’ gold nugget hits the market in San Fransisco

Here we go again — what is believed to be the biggest gold nugget found in modern times in California’s historic Gold Country is going on sale Thursday in San Francisco.

This 6.07-pound whopper is being sold by Tiburon coin dealer Don Kagin, the same dealer who is selling the $10 million worth of gold coins that made such a stir this year after they were found in a couple’s backyard in the Sierra.

The “Butte Nugget,” so named because it was found by a gold hunter in the Butte County mountains, will be unveiled at the prestigious San Francisco Fall Antiques Show. The show opens Thursday at Fort Mason.

This very interesting news item put in an appearance on the sfgate.com Internet site at 10:33 a.m. Pacific Daylight Time yesterday---and my thanks go out to reader Carl Lindfors for digging it up for us.  And if you don't want to read the article, you should at least look at the picture.

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Oct 22, 2014

"Plunge Protection" Behind Market’s Sudden Recovery

Mysterious forces were trying their best, but they couldn’t keep the stock market from swooning [last] Wednesday.

They failed in the morning, despite massive purchases of stock index futures contracts. Within minutes of the market’s opening, the Dow Jones Industrial Average was down 350 points. Later in the day — after a lot of shocking ebb and flow — the Dow bottomed out with a decline of 460 points.

It was only in the last hour of trading that the market saviors managed to trim the Dow loss to just 173 points. And they succeeded only after Janet Yellen’s private, upbeat remarks about the economy were leaked.

Welcome to a new kind of stock market — one that the average investor should refuse to be invested in.

No surprises here, dear reader.  New York Post columnist John Crudele calls it the way it was.  This article appeared on their Internet site at 11:08 p.m. EDT on Monday evening---and I thank Howard Wiener for today's first story.  It's worth reading.

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Top Mortgage Firm Accused of Abuses

One of the nation's largest servicers of home loans may have denied struggling borrowers the chance to fix loan problems and avoid foreclosures, New York's financial regulator has alleged.

An investigation by the state's Department of Financial Services found that Ocwen Financial Corp. inappropriately backdated foreclosure warnings and letters that rejected mortgage loan modifications, making it nearly impossible for borrowers to appeal the company's decision.

Many borrowers who had fallen behind on loan payments also received warning letters months after the deadline for avoiding foreclosure had passed, department investigators found.

Potentially hundreds of thousands of backdated letters may have been sent to borrowers, likely causing them "significant harm," Benjamin Lawsky, New York's Superintendent of Financial Services, wrote in a letter to Ocwen released Tuesday.

This AP story showed up on their Web site at 5:11 p.m. EDT on Tuesday afternoon---and I thank Manitoba reader U.M. for her first offering of many in today's column.

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New Rules Adopted in Hopes of Spurring Home Loans

With the financial crisis and subprime mortgage bust receding further into history, the government is loosening some financial rules, hoping to inject more life into the country's still-recovering housing market.

Both banks and borrowers stand to benefit from the new rules unveiled Tuesday by six federal agencies. While banks will see relaxed guidelines for packaging and selling mortgage securities, fewer borrowers likely will need to make hefty down payments. The board of the Federal Deposit Insurance Corp. voted 4-1 Tuesday to adopt the new rules, and two other agencies approved them as well. The Federal Reserve has scheduled a vote for Wednesday, and two other agencies are expected to adopt the rules soon.

The regulators have dropped a key requirement: a 20% down payment from the borrower if a bank didn't hold at least 5% of the mortgage securities tied to those loans on its books. The long-delayed final rules include the less stringent condition that borrowers not carry excessive debt relative to their income.

Borrow and spend till you puke, but these changes are still a year away at least.  This AP story was picked up by the news.yahoo.com Internet site mid afternoon EDT---and it's courtesy of West Virgina reader Elliot Simon.

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Fed Emergency Update - Mike Maloney

"Ever since the 2008 crisis, I've been telling audiences that that crisis never ended, that the Federal Reserve is doing extreme emergency manoeuvres that show that there's still something very wrong with the world economy. Right now the entire economy really is on artificial life support." - Mike Maloney - October 20, 2014.

This 10:40-minute video commentary, complete with attached charts, was posted on the hiddensecretsofmoney.com Internet site on Tuesday sometime---and from what I've seen so far, it's worth watching.

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Dr. Dave Janda Interviews Your Humble Scribe

I spent about 25 minutes talking to the good doctor on a variety of issues on Sunday---and it was posted on the davejanda.com Internet site on the same day.

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Forex-Rigging Fines Against Banks Could Reach $41 Billion Worldwide, Citi Report Says

Probes into allegations that traders rigged foreign-exchange benchmarks could cost banks as much as $41 billion to settle, Citigroup Inc. analysts said.

Deutsche Bank is seen as probably the "most impacted" with a fine of as much as 5.1 billion euros ($6.5 billion), Citigroup analysts led by Kinner Lakhani said yesterday, estimating that the Frankfurt-based bank's settlements could reach 10% of its tangible book value, or its assets' worth.

Using similar calculations, Barclays could face as much as 3 billion pounds ($4.8 billion) in fines and UBS penalties of 4.3 billion Swiss francs ($4.6 billion), they wrote in a note first sent to clients on Oct. 3.

But nobody will go to jail, so the ethics don't change.  This Bloomberg article, filed from London, showed up on their Web site at 9:37 a.m. Denver time yesterday morning---and I found it in a GATA release.

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EU Fines JPMorgan, UBS, Credit Suisse for Taking Part in Cartels

JPMorgan, UBS and Credit Suisse were fined a total of 94 million euros ($120 million) by the European Commission for taking part in cartels in the financial sector.

The Commission handed JPMorgan a 61.7-million-euro fine for rigging the Swiss franc Libor benchmark interest rate between March 2008 and July 2009. It was also fined 10.5 million euros for participating in a cartel on Swiss franc interest rate derivatives.

UBS' penalty in the derivatives cartel came to 12.7 million euros and that of Credit Suisse was 9.2 million euros. Royal Bank of Scotland alerted the Commission about both cartels and escaped total fines of 115 million euros.

The penalties are the latest by the European Commission, which along with authorities around the world, has handed down billions of euros in fines against top banks for rate-rigging, breaking trade sanctions and other misbehavior.

But nobody is going to jail, so what's the point?  This Reuters story, filed from Brussels, was updated at 11:31 a.m. EDT yesterday, as reader Harry Grant sent it to me at 8:01 a.m. EDT yesterday.  Reader U.M. sent the Zero Hedge take on this headlined "Europe Demands Banks Hand Over Their Lunch Money Following Swiss Franc Libor Rigging".  The ZH folks are certainly less charitable than those over at Reuters.

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ECB to Spend €1 Trillion on Covered Bonds to Kick-Start Euro Economy

The European Central Bank (ECB) has embarked on a spending spree that could see it pump €1tn (£790bn) into the eurozone’s financial system.

After months of debate, on Monday the Frankfurt-based central bank began buying covered bonds in the next stage in its battle to revive the eurozone economy and keep deflation at bay.

ECB president Mario Draghi has made it clear the programme should return the ECB’s accumulated assets to 2012 levels, which means that by the time officials in Frankfurt have finished, its balance sheet could have risen from €2tn to €3tn. The aim of the move is to ease bank credit in the 18-member currency union after a difficult year that has seen a decline in business lending hamper recovery.

Covered bonds have an income stream of debt repayments backed by pools of home or commercial property loans; 90% of the global market is based in Europe, especially in Denmark, Germany, Spain, France and Sweden.

Mortgage-backed securities [MBS] Europe style.  I posted a story about this in Tuesday's column, but this offering from theguardian.com Web site at 5:17 p.m. BST on Monday is more comprehensive---and is something I borrowed from yesterday's edition of the King Report.

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No Russia-Ukraine Gas Deal at EU Talks; Moscow Queries Finances

Russia and Ukraine failed to reach an accord on gas supplies for the coming winter in EU-brokered talks on Tuesday but agreed to meet again in Brussels in a week in the hope of ironing out problems over Kiev's ability to pay.

After a day of talks widely expected to be the final word, European Energy Commissioner Guenther Oettinger told a news conference the three parties agreed the price Ukraine would pay Russia's Gazprom - $385 per thousand cubic meters - as long as it paid in advance for the deliveries.

But Russian Energy Minister Alexander Novak said Moscow was still seeking assurances on how Kiev, which earlier in the day asked the EU for a further 2 billion euros ($2.55 billion) in credit, would find the money to pay Moscow for its energy.

Dependent on Western aid, Ukraine is in a weak position in relation to its former Soviet master in Moscow, though Russia's reasons were unclear for wanting further assurances on finances, beyond an agreement to supply gas only for cash up front.

This Reuters news item, filed from Brussels, appeared on their Web site at 5:29 p.m. EDT on Tuesday afternoon---and I thank Jim Skinner for digging it up for us.  It's worth reading.

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Ukraine Used Cluster Bombs, Evidence Indicates

The Ukrainian Army appears to have fired cluster munitions on several occasions into the heart of Donetsk, unleashing a weapon banned in much of the world into a rebel-held city with a peacetime population of more than one million, according to physical evidence and interviews with witnesses and victims.

Sites where rockets fell in the city on Oct. 2 and Oct. 5 showed clear signs that cluster munitions had been fired from the direction of army-held territory, where misfired artillery rockets still containing cluster bomblets were found by villagers in farm fields.

The two attacks wounded at least six people and killed a Swiss employee of the International Red Cross based in Donetsk.

If confirmed, the use of cluster bombs by the pro-Western government could complicate efforts to reunite the country, as residents of the east have grown increasingly bitter over the Ukrainian Army’s tactics to oust pro-Russian rebels.

This article, filed from Donetsk, Ukraine, put in an appearance on the New York Times Web site on Monday sometime---and I thank Roy Stephens for sending it.

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Turkey to Let Iraqi Kurds Cross to Syria to Fight ISIS

Turkey will allow Iraqi Kurdish forces, known as peshmerga, to cross its border with Syria to help fight militants from the group called the Islamic State who have besieged the Syrian town of Kobani for more than a month, the Turkish foreign minister announced Monday.

The decision represents an important shift by the Turkish government, which has angered Kurdish leaders and frustrated Washington for weeks by refusing to allow fighters or weapons to cross its border in support of the Kurdish fighters defending the town. Speaking at a news conference in Ankara, the Turkish foreign minister, Mevlut Cavusoglu, said that his government was “helping the pesh merga cross over to Kobani.”

The announcement, along with an American decision to use military aircraft to drop ammunition and small arms to resupply Kobani, reflected escalating international pressure to push back Islamic State militants. As the United States-led coalition has increased its airstrikes as well as its coordination with the Kurdish fighters, who have provided targeting information, the militants have lost momentum after appearing close to overrunning the town.

This is another story from the New York Times Web site.  This one was posted there on Monday as well---and filed from Mursitpinar, Turkey---and it's also courtesy of Roy Stephens.

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Jim Rickards: China GDP Figures Are Bogus

Jim Rickards, chief global strategist at West Shore Funds, explains why he's not closely watching China's gross domestic product figures.

This 4:21-minute CNBC Squawk Box video clip appeared on their Web site at 8:15 p.m. EDT on Monday evening---and I thank Harold Jacobsen for bringing it to our attention.  It's worth your time if you have it.

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James G. Rickards: In the Year 2024

Writing for The Daily Reckoning, fund manager, author, and geopolitical strategist James G. Rickards imagines life in the year 2024 as being under the totalitarian control of a world central bank that has outlawed not only gold but also markets and money itself.

While Rickards' nightmare scenario is the perfectly logical consequence of the trend of central banking, we still have a few years to push the world toward a different future.

Rickards' essay is headlined In the Year 2024 and it's posted at The Daily Reckoning Web site---and it falls into the absolute must-read category.  [NOTE: I posted a story that critiqued Jim's article in yesterday's column.  It was headlined All the world’s gold to be confiscated and buried in Switzerland by 2020 argues Jim Rickards.  Now that I've read the original Rickards article, courtesy of reader Dan Lazicki, the title to the story is highly misleading, as is the author's commentary in spots, and I'm glad that I have the real deal for you today. Ed]

The first two paragraph of introduction are courtesy of GATA's Chris Powell---and I found the original Rickards essay posted on the gata.org Internet site yesterday.

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Citi Buys Deutsche Commodities Trading Book in Expansion Push

Citigroup Inc has bought Deutsche Bank AG's energy and metals book, a source familiar with the matter said, in the latest sign of expansion from the U.S. firm in commodities trading as rivals retrench.

Citi won Deutsche's oil, metals and power books this summer and autumn, the source said, after a bidding round that saw several Wall Street firms and trading houses chasing the opportunity to take on the positions of a once top-five commodities bank.

The deal will help Citi close the gap with top banking rivals in commodities trading, even as some exit the sector under increased regulatory scrutiny and lower margins.

Deutsche Bank, which once competed with Barclays and JPMorgan Chase & Co to challenge the long-running energy and metal franchises of Goldman Sachs and Morgan Stanley, announced it was largely exiting the sector late last year.

But, dear reader, Deutsche Bank is keeping its precious metal trading division.  This Reuters news item, filed from London, was posted on their Web site at 1:59 p.m. EDT on Monday afternoon---and I thank reader M.A. for another offering in today's column.

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First Swiss Gold Poll Shows Pro-Gold Side in Lead at 45%

GoldCore's Mark O'Byrne reported yesterday that the first opinion poll on Switzerland's gold repatriation referendum proposal shows 45% of respondents in favor and 39% opposed.

Chris Powell wrote the above---and I borrowed the headline from a GATA release as well, but the first person through the door with this story was reader U.M.

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UBS: Swiss Gold Exports At 7-Month High; Physical Demand Absorbing Investor Liquidations

Swiss trade data show gold exports hit a seven-month high in September and that the flow to Eastern from Western nations continues, says UBS. Swiss exports were 172.6 metric tonnes last month, the most since February.  Gold shipments to China jumped to 12 tonnes after averaging around three tonnes during the previous four months.

Shipments to Hong Kong increased to 24.7 tonnes, the most since April. Switzerland exported 58.5 tonnes to India last month, the largest shipment year to date and nearly twice the average monthly volume, UBS says.

Meanwhile, September gold imports into Switzerland were also high at 194.6 tonnes. Inflows from the U.K. jumped to 63.3 tonnes from 8.6 in August. “This suggests that a good portion of investor liquidations in September, that pushed the prices through the $1,200 psychological level, were absorbed by physical demand, with metal making its way from London vaults into Swiss refineries for refining/recasting and ultimately shipped to physical buyers in Asia,” UBS says.

This short commentary appeared on the kitco.com Internet site yesterday at 9:38 a.m. EDT---and you may have to scroll down a bit to get to it, but you've read most of it already.  It's another contribution from Manitoba reader U.M., for which I thank her.

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Dhanteras Sales Jump 20% over Lower Gold, Silver Prices

This Dhanteras saw jump in sales of jewellery in various parts of the country by at least 20% over last year following lower gold and silver prices in the retail markets. People are preferring lightweight jewellery and gold coins over traditional jewellery. In Ahmedabad the local jewellers expected the business to cross Rs 250-300 crore till Diwali (October 23).

Average gold prices that were around Rs 32,500 per 10 grams during last Diwali, were hovering around Rs 27,500 per 10 grams this year. Also, silver prices this year before Diwali were around Rs 39,000 per kg compared to around Rs 49,000 per kg last year during Diwali.

In Ahmedabad, upbeat over the lower prices of the yellow metal, as many as 60 jewellers under the Ahmedabad Jewellers' Association had launched the grand shopping festival "Swarna Utsav" which concludes on Diwali, with primary objective to recover the losses incurred by them in the past six months due to lack of business.

"During Dhanteras the sales of gold and silver has been significantly higher than last year. We expect sales to rise by 15-20% this year over last season," said Shantibhai Patel of the Ahmedabad Jewellers' Association. He said that this was due to lower price of the precious metals.

This gold-related news item appeared on the bullionbulletin.in Internet site at yesterday IST sometime---and it's another story from reader U.M.

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Chinese and Indian Gold Buyers Back in Market in a Big Way

What has been particularly strange about the gold market over the past two years is that the stronger the physical demand appearing for gold, the weaker the gold price has tended to get.

In the past few months, the gold price has fallen back from around $1,340 down at one time to $1,190 and now hovering back seemingly trying to breach $1,250 on the upside again, yet by all accounts demand in the two biggest consuming nations has been soaring and they are, between them, taking in virtually everything the world’s gold mines can produce.

The two countries are India and China. A mild relaxation of some of the import controls put on gold in the former saw gold imports rise to around 95 tonnes in September, while the weekly withdrawal statistics from the Shanghai Gold Exchange show that gold demand has latterly also picked up extremely well in China after a good start to the year, but then a marked downturn from March to August.

Indeed the latest weekly figures from the SGE could be seen as particularly strong given that the markets were closed for half the period due to China’s Golden Week holiday. While the total for the two weeks at around 68 tonnes may not seen spectacular, given that these purchases were actually made in only five days (September 29 and 30 and October 8, 9 and 10) due the long holiday market closure could suggest that Chinese demand is indeed soaring enormously.

Supply and demand no longer matter in all key commodities as the banks have hijacked the price discovery mechanisms on the Globex/Comex---and Lawrie knows that.  This commentary appeared on the mineweb.com Internet site yesterday---and it's worth skimming.

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Top Bullion Consumer China Works on First Gold Forwards, Options

The Shanghai Gold Exchange (SGE) is working on plans for China's first forwards and options in gold, sources say, potentially putting China ahead in the race to set an Asian pricing benchmark that might eventually rival the London gold fix.

China, which overtook India last year to become the world's biggest consumer of gold, bans trading in commodity options and forwards at present to limit speculation.

But Beijing is setting the stage for the launch of such derivatives as it opens up its markets, and gold could be among the first commodities on the list, although it remains unclear when trading might start.

The state-run SGE, at the forefront of China's efforts to dominate bullion pricing, opened an international bourse last month and foreign banks have shown strong interest in trading its yuan-denominated contracts. The exchange now wants to expand its product line to boost liquidity.

This longish Reuters article, co-filed from Singapore and Shanghai, appeared on their Web site at 2:50 a.m. IST on their Wednesday morning---and it's also courtesy of reader U.M.  It's also her last contribution to today's column, for which I thank her on your behalf.

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China Admits 40% of Magnetic Rare Earths Supply Is Illegal

World's dominant supplier of rare earth elements reveals a huge portion of supply used in magnets is illegally mined; much larger than initially anticipated

China – the world's leading producer of rare earth elements – has revealed that 40% of its supply used in high strength magnets is from illegally mined sources in the country.

The figure was revealed by rare earths expert Prof. Dudley Kingsnorth of Industrial Minerals Company of Australia (IMCOA) at a high level conference in Milan, the European Rare Earths Competency Network (ERECON).

Prof. Kingsnorth, who is the leading source of data in the rare earths market, was citing experts within China who are not only involved in the mining of the elements but also the government-led rare earths association.

I had a story about this in my Tuesday column, but this one is far more comprehensive.  It was posted on the mining.com Web site yesterday---and I thank reader M.A. for bringing it to my attention, and now to yours.

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